The rupee rose 0.7% against the dollar in the interbank market this week, closing at 279.04 on Friday.
- The IMF has indicated its readiness to send a delegation for another review.
- Various things give clues about currency prediction: Tresmark.
- Analysts say USDKR forecasts are far from accurate.
KARACHI: Pakistan’s economy is supported by US dollar supply and demand amid an optimistic mood regarding the country’s economic outlook after the International Monetary Fund (IMF) indicated its intention to work with the newly elected government to unlock The rupee is expected to remain stable next week.reported to be the last tranche of an ongoing debt program news on sunday.
The rupee rose 0.7% against the dollar in the interbank market this week, ending at 279.04 on Friday compared to Monday’s closing price of 279.26.
The IMF recently said it would be willing to send a delegation to review the $3 billion standby agreement once a cabinet is formed and the ongoing program concludes, scheduled to end in April.
Under the current financing agreement, a final $1.1 billion still remains to be paid.
Analysts at Tresmark said that while the rupee-to-dollar exchange rate cannot be predicted with certainty, a number of things offer some clues about the currency’s outlook. “So while you may have a good model, predicting USD-PKR is never an accurate job. After all, confidence is gained in drops but lost in buckets.”
According to Tresmark, the State Bank of Pakistan (EBP)’s strategy of restricting imports and outflows will maintain equilibrium and reduce the demand for dollars. Rupee liquidity constraints until last week forced banks to do buy-sell swaps, which increased forward premiums while also creating dollar liquidity.
Despite market expectations of a lower rate, the policy rate was kept at the current level to encourage rupee demand.
“This is why we have maintained a ‘range-bound’ call on USDKR over the past few weeks. Going forward, we expect the rupee to remain where it is, helped by the flow of positive news from the IMF and Moody’s.” the data provider said.
“The IMF issued a statement saying it supports developing a new program with the incoming government and also indicated that the third tranche is on track. The news boosted the rupee, stock markets and government bonds.” added.
Analysts fear that PKR’s stability could be at risk as the real exchange rate poses significant risks and is expected to end February at around $104. At the same time, they believe that the IMF will not call for currency devaluation.
Meanwhile, SBP’s foreign exchange reserves continued to trend downward, further decreasing by $54 million due to repayment of external loans, reaching $7.896 billion on March 1st.
The report said a rate cut is likely to occur at the next policy meeting date on March 18, and the rupee value may appreciate a bit more, posing new immediate threats to monetary policy. he pointed out.
The report states that “the above are real threats, but they are being neutralized by optimism regarding the continuation of existing IMF programs and the launch of new programs soon after.”